Sin­ga­pore Air­lines beats es­ti­mates, sees chal­lenges ahead

The Pak Banker - - BUSINESS -

Sin­ga­pore Air­lines Ltd. said its op­er­at­ing en­vi­ron­ment will re­main chal­leng­ing and travel de­mand will be volatile as South­east Asia's largest car­rier faces in­creased com­pe­ti­tion from bud­get ri­vals.

Net in­come was S$274.9 mil­lion ($195.7 mil­lion) for the three-month pe­riod ended Dec. 31, com­pared with S$202.6 mil­lion a year ear­lier, the air­line said in a state­ment to the stock ex­change Thurs­day. An­a­lysts on av­er­age were ex­pect­ing profit of S$224 mil­lion, ac­cord­ing to data com­piled by Bloomberg. Rev­enue fell 4 per­cent from a year ear­lier to S$3.9 bil­lion.

"On the com­pet­i­tive front, ex­pan­sion of other full-ser­vice air­lines as well as low-cost car­ri­ers, par­tic­u­larly in South­east Asia, will con­tinue to ex­ert pres­sure on loads and yields," the air­line said in the stock ex­change fil­ing.

Sin­ga­pore Air has bought more planes and started sub­sidiaries in Aus­tralia and In­dia to com­pete with a surge in bud­get travel. It has of­fered to take partly-owned Tiger Air­ways Hold­ings Ltd. fully pri­vate, and has of­fered pre­mium econ­omy seats as plung­ing oil prices al­low for cheaper fares.

"It's bet­ter then ex­pected, a strong set of re­sults. Mar­kets will re­act pos­i­tively to it," Ajith Kom, a Sin­ga­pore­based an­a­lyst at UOB Kay Hian Pte Ltd., said by tele­phone. "They've al­ways said they see chal­lenges go­ing for­ward, that's typ­i­cal" for the citys­tate's flag car­rier. Sin­ga­pore Air shares fell 0.92 per­cent to close at S$ 10.82 be­fore the earn­ings an­nounce­ment and are down 11 per­cent over the past year, com­pared to a 25 per­cent drop in Straits Times In­dex.

Sin­ga­pore Air has been look­ing to build al­liances abroad as part of a mul­ti­hub strat­egy. It part­nered with In­dia's Tata Group to start Vis­tara in Jan­uary 2015 and owns about 23 per­cent of Vir­gin Aus­tralia Hold­ings Ltd. The com­pany's Scoot unit also teamed up with Nok Air­lines Pcl of Thai­land to set up NokS­coot.Op­er­at­ing profit for the quar­ter nearly dou­bled, up 96 per­cent to S$288 mil­lion. De­spite the ben­e­fit of lower fuel prices, the com­pany said it lost S$72 mil­lion on fuel hedges dur­ing the third quar­ter and S$77 mil­lion from the weak­en­ing of the lo­cal cur­rency against the U.S. dol­lar.

The car­rier has hedged 46.6 per­cent of its fuel needs for the Jan­uaryMarch quar­ter at S$90 a bar­rel, it said in the state­ment. Jet fuel prices in

the bench­mark Sin­ga­pore have slumped 36 per­cent over the past 12 months to $43.55 a bar­rel, ac­cord­ing to data com­piled by Bloomberg.The par­ent air­line car­ried 4.83 mil­lion pas­sen­gers in the quar­ter, up from 4.75 mil­lion a year ear­lier. It filled 80 per­cent of seats in the three­month pe­riod, com­pared with 78 per­cent a year ago.

Sin­ga­pore Air hauled 312.5 mil­lion kilo­grams of cargo in the Oc­to­berDe­cem­ber pe­riod, up from 291.9 mil­lion kilo­grams a year ago. It filled 64.9 per­cent of cargo space on its planes, com­pared with 65.1 per­cent a year ear­lier. Pas­sen­ger yield, or money earned from car­ry­ing trav­el­ers each kilome­ter, fell to 11 Sin­ga­pore cents per kilome­ter on the par­ent air­line, from 11.5 Sin­ga­pore cents a year ear­lier. Cargo yield dropped to 28.8 Sin­ga­pore cents from 33 Sin­ga­pore cents.

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